Montreal, Canada

With the exception of Russia, several emerging market central banks have started tightening monetary policy. That implies rising currencies vis-à-vis the U.S. dollar and EUR over the next 12 months and beyond as major economy central banks struggle with exiting fiscal profligacy and ever-present deflation. Also, a growing sovereign debt crisis will restrain central banks' ability to tighten monetary policy as rising funding costs threaten another macroeconomic blow-out.

The emerging markets, unlike the major markets, are home to some of the largest surpluses over the last ten years and, for the most part, have already experienced the tribulations of a currency and debt crisis in the late 1990s. Many of these units have already rallied since 2003 and will only get stronger in the years and decades ahead.

Many of the largest countries representing this group also harbor superior growth rates that should translate into currency gains as domestic central banks begin to tighten in order to restrain inflation; India and China have already begun a series of tighter credit policies aimed at cooling accelerated GDP growth and rising inflation. Other central banks will follow.

Among the major market central banks, only Australia and Norway have started to hike lending rates. But with industrial slack still widespread across mature economies, the odds of a rapid series of rate hikes in these countries is unlikely. That's not the case in the emerging markets.

Indeed, one could surmise that if the 1990s belonged to the U.S. dollar (1995 to 2001) and the 2000s belonged to the EUR, then this decade might belong to emerging market currencies like Brazil, China, India and other countries sporting far healthier balance sheets than those in the West. These countries are home to the biggest foreign-exchange reserves and that trend won't diminish any time soon.

The way to play the bull market in emerging market currencies is to avoid emerging market debt and most equities and overweight domestic currencies. My favorites now include China, India and Brazil.

Bonds should be avoided. Credit spreads measuring U.S. Treasury bonds and emerging market debt recently hit their lowest levels since before the credit crisis, at just 265 basis points, or 2.65%. And some countries, like Brazil, offer yields that are now barely 200 basis points over Treasury bonds. Emerging market bonds have enjoyed a great boom over the last ten years and are expensive. Rising interest rates in these countries doesn't bode well for bonds and, to a lesser extent, stocks.

A much safer way to ride emerging markets going forward is to buy currency CDs and ETFs, or exchange-traded funds. Bonds denominated in these currencies are likely to decline in value as central banks tighten monetary policy, which is bearish for fixed-income securities. But currency accounts and ETFs should benefit as emerging market central banks hike interest rates.

Everbank in the United States provides an easy way to accomplish this task through FDIC-insured accounts and BRIC currency CDs, among others. Also, many currency ETFs provide this exposure. Offshore, several private banks provide emerging market currency CDs, including Jyske Bank in Denmark and Valartis Bank Austria.

Major market currencies now face a long struggle to reduce bloated deficits and will struggle to aggressively raise interest rates because most economies are too weak. Deflation remains a threat in many countries. The majors, like the dollar, EUR and yen, should largely be avoided if you're a speculator.

Resource currencies, though providing better fundamental value than the majors, are expensive. Canada is too hot among foreign currency investors and the same is true for Australia and Norway. A correction looms for commodities and that will serve as a good buying opportunity to accumulate these units at lower prices amid a bull market for raw materials since 2002.

The best values now include many emerging market currencies and gold. The majors will struggle this decade amid a massive fiscal drag, excessive industrial capacity and the challenge to restore fractured credit intermediation. Emerging market countries largely don't have these problems and will face more international pressure to let their currencies appreciate versus the majors – supported by rising interest rates – now in progress in India and China.